HL Deb 25 July 1979 vol 401 cc1962-70

4.28 p.m.

The MINISTER of STATE, TREASURY (Lord Cockfield)

My Lords, with the leave of the House, I will now repeat a Statement being made in another place in answer to a Private Notice Question on reductions in public expenditure. The Statement is as follows:

"Not at this stage, Sir. Decisions on the expenditure plans for 1979–80 were announced in the Budget. The normal annual review of the plans for 1980–81 and later years is now in process. This review is not yet complete but the Government hope to publish their decisions in the autumn."

That, my Lords, is the end of the Statement.


My Lords, while thanking the Minister for his courtesy in repeating the Statement made by the Chancellor of the Exchequer in another place in answer to a Private Notice Question by my right honourable friend Mr. Healey, I cannot pretend to register any pleasure at the content of the reply itself, which is as brief as so many hope will be the life of this Government.

It says nothing; it talks about publishing decisions in the autumn. I wonder whether the Government truly realise the grave feelings of instability and disquiet which exist not only throughout the public sector—and in the private sector, which, let us make no mistake, is very much dependent in many ways on the successful conduct of the public sector—but in the homes of humble people throughout the land.

First, there is an announcement made only six weeks ago in the Budget of an economy cuts programme involving £3 billion. Now, only six weeks later, the figure appears to be £4 billion, a mere increase of 33⅓ per cent. Would the Minister account for the difference? Is it because of the rise in prices and inflation engendered by the Government's policies leading to an increase in the public sector borrowing requirement? The media reflect the public anxiety and mood. Rumours in the media are rampant about more and more slashing cuts and about splits in the Cabinet in regard to them. I do not need a reply that the Government cannot be responsible for the media. I have said this is the measure of public disquiet, and the reply given this afternoon will do nothing to relieve it.

We are not even told when in the autumn this Statement will be made; I trust that the Minister in his reply will try to tell us when. Has the noble Lord nothing to say before the Recess to relieve the anxiety in so many homes about more and more unemployment as a result of the Government's policies? Does he know—does he take into account?—the extent of the misery and despondency which these policies are creating, with the accompanying crippling programme of cutting the social services? Does he know that these swingeing cuts are indeed cutting our people into two? Perhaps I may be permitted to read an excerpt from the Financial Times which appeared this morning under the heading, "Spending 'cuts ' in context"; Pensioners should not be impoverished because they are numerous, if at all possible; and welfare spending can be a useful built-in economic stabiliser. It is a little disturbing in this context that the Chancellor should have defended the cuts in relation to the borrowing requirement as well as to the demands on resources. The borrowing requirement tends to vary cyclically. Sound money and public preference demand economical management of the public purse. They do not demand a rule which would compel the Government to deflate more savagely in a recession than in a boom—an instability rule". The Government seem to be falling into just that trap, deflating more savagely in a threatened recession than in a boom and perpetrating a rule for instability. The almost contemptuous Statement made this afternoon is as lacking in satisfaction as it is in humanity. We are left before the Recess with a Statement that means that the axe of Damocles continues to hang over this nation until some time in the autumn.


The axe of Damocles?


My Lords, if I am corrected by the noble Lord, Lord Boyd-Carpenter, I assure him that I know the noble thing for people to do is to have a sword applying to Damocles. This Government have decided to have an axe. The Statement made this afternoon is truly lamentable.

Baroness SEEAR

My Lords, we on these Benches thank the Minister for repeating the Statement made in another place, and of course if that is the Statement made by his right honourable friend, there is nothing he can do about it except repeat it. I am bound, however, to say that while one sympathises with the need for some cuts—and we are the first to agree that there is overmanning and that there are sections in which economies in labour have to be made—I must urge on the Minister, as some of us did in the House only yesterday, that if these things have to happen, the maximum amount of information and consultation is the only possible way to get them accepted. If we are given Statements of this kind when, as the noble Lord, Lord Mishcon, said, there is great anxiety in the country, it is bound to lead to misunderstanding and resistance to the changes that have to be made.

Where cuts have to be made, we implore the Minister to see that they fall more on the administrative side, where there is abundant evidence of excessive manning, and less at the operational level. The Government should at the same time give major priority—I know this is becoming like King Charles' head, but 1 make no apology for it—to seeing that where people are being displaced, they are prepared and moved into those jobs where there is still a shortage of skilled labour. If we are to have increased unemployment, we must make it a prior obligation to see that somehow those vacancies are filled.


My Lords, it is abundantly evident that the noble Lord, Lord Mishcon, is totally unaware of the economic plight to which the policies of the Government whom he supported brought this country. We found our-selves faced with a rising and accelerating rate of inflation; we found ourselves faced with a money supply which was at the top end and threatening to exceed the guidelines which they themselves had laid down; and we found a public sector borrowing requirement substantially in excess of the figures to which the then Chancellor of the Exchequer had committed himself. In those circumstances, it was absolutely essential that the Government should take action, and the Government took the action which was required. The only way we can safeguard the future of this country, the only way we can ensure a soundly based recovery and the only way we can ensure that in the long run we have jobs for our people is to squeeze out inflation, and that is what we are determined to do.

I turn to the Statement which I repeated and which dealt with a point raised in another place about reductions in Government expenditure. What we are concerned with are plans for the year 1980–81. These are clearly difficult and complex matters which require the most careful consideration. That consideration is not yet complete and decisions are not complete either. The House will be informed as soon as we have a complete statement of the plans about which to inform them, and we hope that will be soon after the House reassembles. I would remind noble Lords that the previous Government did not publish their Public Expenditure White Paper until after Christmas. We shall, in that and in other matters, be improving on the performance of the previous Administration. I am grateful to the noble Baronesss, Lady Seear, for what she said, which I felt was much more helpful and constructive. I hope that what I have said about the intentions of the Government to make a Statement about their plans as soon as possible after they have been completed will meet the difficulties she has in mind.


My Lords, I should like to ask the Minister whether it is a correct interpretation of the remarks that he has just made that this Government regard further restrictive measures as the appropriate response to a deterioration of the economic situation—due to external causes, or to a fall of exports or a rise in imports, or arising from a deterioration of the world situation—thus making a larger proportion of our manpower resources and our industrial capacity idle? That is certainly the impression that he has given. All Governments since the war have been actuated by the desire that the public sector should act as a stabiliser of the economy, not as a destabiliser. Acting as a stabiliser means to restrict in time of overdue expansion and to expand in times of overdue restriction. But the present Government seem to be actuated by the motive that the public sector borrowing requirement must be reduced at all costs, even if the cause of a rise of the borrowing requirement is a fall in income and in consequence a fall in tax revenue, or a rise in expenditure due to higher unemployment. If this is the Government's policy, the more clearly it can be stated and the sooner it can be brought home to the people of this country, the more important it will be from a general point of view.


My Lords, may I put two questions to the noble Lord. First, does the postponement until the autumn of any further Statement mean that there will be further opportunity for consultation about the cuts with those providers of services most affected? Secondly, the noble Lord referred just now to plans for 1980–81 and 1981–82. Is he aware that it really is impossible for a body such as a university to plan for 1980–81 or 1981–82 when at the moment it has absolutely no idea of the extent to which future pay settlements will be taken into account by means of a revision of the cash limit? Until that aspect is clearer, it really is a mockery to talk about other people being able to plan for 1980 or 1981.


My Lords, may I deal first with the points raised by the noble Lord, Lord Kaldor. The noble Lord is a well-known and very distinguished follower of the late Lord Keynes, who was ultimately responsible for the theory of fine tuning. As my right honourable friend the Chancellor of the Exchequer made clear in his Budget speech, we do not accept that the policy of fine tuning has been to the advantage of this country. Indeed we believe—and I explained this at great length in the speech that I made in your Lordships' House when we debated the Budget strategy—that its long-term effect has been to depress output, not to increase it, and therefore to create for the country greater, not fewer, difficulties. Nor do I accept the noble Lord's claim that our present difficulties are due primarily or largely to external causes. Our difficulties are primarily due to ourselves. We must get a higher level of output and productivity, and we must bear in mind that if we pay ourselves more than our level of productivity warrants, the result is inflation. The policies of Her Majesty's Government are directed primarily to squeezing out inflation, as we believe that this is the necessary pre-condition of a recovery in both output and employment.

With regard to the point raised by the noble Lord, Lord Boyle of Handsworth, we are in touch with local authorities and other spending authorities and we shall seek to ensure that they are aware of what is expected of them in sufficient time for them to make the necessary changes in 1980–81.


My Lords, as an absolute non-expert on this matter, may I ask the Minister how he is to convince people that he will stimulate the economy by creating unemployment? In this context I sympathise with the noble Baroness, Lady Seear, who brought a note of humainty into the argument. It seems to me that ever since the Government came into office words have had no meaning. We are back to Alice in Wonderland. Words mean whatever the Government want them to mean. One is reminded of Humpty Dumpty's reply to Alice. What the Government say cannot be understood by ordinary people who do not know the complicated economics of the argument.


My Lords, we use words in their ordinary English meaning. We are just as concerned about the level of unemployment as is the noble Baroness, or indeed anybody else in the country. The present level of unemployment is a result of the kind of policies that have been followed in recent years, and if the level of unemployment regrettably goes up—and I emphasise the words " regrettably goes up "—it will be because of the necessity to take measures to deal with the situation.


My Lords, may I ask the noble Lord, Lord Cockfield, whether he has considered the effect of his Statement on working people in this country who do not know whether, or when, they are to be discharged? I suppose that one has to allow for party propaganda, and I have no doubt that the propaganda is the result of certain home-work done by the Conservative Party during the pre-election period. They have since had some time in which to work it out. They must have had some idea in mind. There have been leaks in the newspapers. Working-class people have done their best to do their jobs and now they are not sure what is to happen to them. They will have to wait until the autumn, after the Recess. Noble Lords are now to have two months' holiday in the South of France or wherever they are going. Ordinary people have to wait until noble Lords return in order to find out what is to happen to them.


My Lords, under the noble Lord's Government people would have had to wait until after Christmas—


It was not my Government, my Lords; it was elected democratically.


My Lords, I apologise for suggesting that the noble Lord had any degree of responsibility for the previous Administration. I was misled into assuming that he supported the Opposition by the fact that he is sitting on their Benches, but if he is now dissociating himself from them, it is a matter on which I would sympathise with him.

But so far as the Private Notice Question is concerned, I have repeated the Statement that has been made in another place. I have said that at the moment the plans are not complete. It is not possible to announce plans that have not been made. When the plans have been completed we shall announce them at the earliest possible date. We hope that it will be shortly after Parliament reassembles after the Recess, and that would represent a considerable improvement on the performance of the previous Administration.


My Lords, I note that the Minister's tone is now more cheerful following the point I raised yesterday, and I should like to congratulate him upon that. Unfortunately, it has not made any of us on this side any more cheerful, but at least the Minister's spirit seems to have improved since yesterday.

The Minister said that he liked to use ordinary English, giving it its ordinary meaning. May I ask him whether the phrase " squeezing out inflation ", in its ordinary meaning to the ordinary Englishman, carries with it by inference an increase in VAT to 15 per cent., a borrowing rate for small businesses which is a very high rate indeed, and general policies which have sent prices up rather dismally since the present Government came into power? May I lastly ask him, again within the context of the use of ordinary English, whether he has not heard of a world recession; whether the economic pundits have not yet managed to reach his ear with their expression of foreboding as to how that world recession may in turn hit the economy of this country; and whether he thinks that, in such conditions, these slashes, this creation of unemployment, are in the slightest degree curative or whether, indeed, they are not deplorable?


My Lords, I do not accept the noble Lord's analysis of the situation. The measures which have been taken by the Government were absolutely essential in the context of the situation as it existed following five years of a Labour Administration. There is only one way to get this country back on its feet, and that is to start—and I repeat the phrase—by squeezing out inflation. This entails taking measures which in themselves are unpleasant measures—there is no doubt about that at all—but the necessity to take them is absolutely clear and we have not flinched from taking them.

What we are doing is laying the foundations for the future growth and prosperity of this country. We are well aware of the deteriorating international situation. We have ourselves referred to it on more than one occasion. It will make the job that we face more difficult than it otherwise would have been, but it merely underlines the necessity for tackling the problems.


My Lords, I do not know how long the last Liberal Administration took in preparing their plans, but may I ask the noble Lord whether, if the Government's plans are completed within the next three months, they will give serious consideration to recalling Parliament so that they can be presented and discussed?


My Lords, if the noble Lord would care to calculate three months from the present day it would seem to take us approximately to the time when Parliament will be reassembling anyway.


The noble Lord said " within ".